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Monday, March 18, 2013

After an initial
assessment of Cyprus’s bank shortfall of around €17.5 billion in January 2013,
the matter of a bailout came to a head two months later. The sticking point was
whether depositors in Cyprian banks would be charged a one-time levy as the
Cypriot part of the bailout. The E.U. and the European Central Bank, backed up
internationally by the IMF, insisted that the bailout be limited to €10
billion, with the remainder of the shortfall’s bailout, over €5 billion, being necessarily
supplied by Cyprus through a levy on depositors. Not having been culpable in
the Cypriot bankers’ decisions to buy Greek bonds, the depositors spontaneously
rose in protest. For a time, that seemed to work. The Cypriot legislature
initially rejected the troika’s proposal. In the end, the Cypriot legislature
narrowly approved the loan agreement 29 to 27 in late April, 2013. The question
I address here is whether the obligations assumed on the Cyprus side are
ethical or unethical.